Trading Just One Stock | Podcast Episode #491

0:00
Hey everybody. This is Ryan Mallory with shareplanner.com’s Swing Trade in the Stock Market. In today’s episode, we’re going to talk about whether you should be trading just one stock. Is that a good strategy just to narrow your focus towards 1 stock and one stock only?

0:15
Or should you really have more of a broader view of the stock market and trade multiple stocks? I mean, for me personally, I trade a ton of different stocks. So we’re going to talk about that here today in this episode and in today’s e-mail, we got a guy he asked to be called Jimmy from South Carolina.

0:33
And Jimmy from South Carolina writes, hey, Ryan, this is Jimmy from South Carolina. Feel free to use that as a redneck name if you want. I am. Can you give me a suggestion of how you would trade on a $50,000 IRA account?

0:48
I have been dabbling with some swing trading and day trading as well On Fidelity. I mainly trade Berkshire Hathaway for the past year but I got out of it after it dropped with Warren Buffett’s announced retirement. Lately I have been trying to day trade TQQQ and most recently QQQ.

1:07
And then he says yeah I guess that probably means it hasn’t been the best for him. I’ve had mixed success, sometimes making money and most of the time getting stopped out. Anyways, I was just wondering what is your advice for me and what it would be? I’m looking for another good stock to trade to take Berkshire’s place since it has been struggling for the past two months.

1:27
Thanks a lot. Jimmy from South kakalaki now he should have said Jimmy from South Kakalaki instead of Jimmy from South Carolina. That’s I like S Kakalaki. Not sure if that has some kind of connotation for South Carolinians, but anyways, he says PSI have really gotten a lot out of your videos and podcasts and I appreciate your advice.

1:45
OK, so there’s a lot to unpack here. He’s asking about his IRA account. How would you trade it? But really the main focus here is this trading one stock. And is it something that I think that people should do? Not really. And there’s a lot of reasons for that one. You’re going to have a lot of dull moments if you’re going to hold yourself to high standards when it comes to taking good trade setups.

2:03
There’s going to be a lot of moments where you’re not trading at all. And so there’s going to be a lot of missed opportunities that you could have had in other stocks as well. And focusing in just one stock. And I think it’s kind of amazing that he focused on Berkshire Hathaway of all stocks. I don’t even know.

2:18
I don’t think I’ve actually ever traded Berkshire Hathaway, much less made it my my one and only stock. So kudos to him. I don’t know how he did it, but Berkshire Hathaway Class A shares that trades for $709,000. I’m assuming that’s not what he was day trading. I’m assuming it was the Class B shares at $473 which is a little bit more realistic.

2:39
Especially with a $50,000 account. You’re, you can’t even trade A, this is $700,000 stock. So you’re not always going to have trading opportunities in a stock. There’s, there’s a bull market right now ongoing, but that doesn’t necessarily mean every stock is setting up to, to trade.

2:58
So you may have a bull market that’s ongoing, but you don’t have a good opportunity to take on. And there’s a lot of stocks that don’t participate in the bull market. If you look at the the bull market that we’re in right now, only 40% of the stocks are trading above their 200 day moving average. So that means 60% of the stocks are really not keeping up with this overall market.

3:15
So if you were trading just one stock, there’s a 60% chance just on the numbers basis here that that stock is not participating in the rally. And in case of Berkshire Hathaway, it’s not it’s been dropping for the past few months. It’s below its 200 day moving average even. And you take Apple, Apple’s a perfect example.

3:34
I’m actually in the stock right now. I got long on it. I want to say about a week, week and a half ago, last week, we’ll just say it. It has done nothing. I mean, it was setting up for a breakout. It, it looked really good, but it since breaking out, it’s just traded sideways and it’s like it breaks out and then it gets into more consolidation.

3:51
Now if that was the only stock that I was trading in for a long time, that was a lot. That was the only stock that a lot of people traded for me. I’ve always traded multiple stocks. I really will trade anything over $10 a share as long as it’s setting up well and it has a good reward risk ratio and it’s not a stock that hit has heavy headline risk to it, I’ll trade it.

4:09
But if I was just trading on Apple, that would be a totally different situation. I mean, that’s that is that’s one. I would say over the past year or so, when the stock market’s going up and Nvidia’s rising and Microsoft’s going up, this one tends to struggle.

4:26
And when those are going down, it tends to almost be like a contrarian stock or a flight to safety that Apple would not be the one that I would want to give myself to, to only be trading. And it’s the same thing with Berkshire Hathaway or any thoughts? Any I wouldn’t do that with NVIDIA because there’s going to be times where NVIDIA not lately, but there’s going to be times in the future where NVIDIA may not be participating and the market rally.

4:47
And so you have to keep that in mind when you’re just training 1 stock. That’s not necessarily the the stock that’s always going to be participating when the market’s bullish. The other thing that I would say is that it forces you to take a trade setup, not the trade setup. What do I mean, and what’s the difference there?

5:04
A trade setup is essentially, if let’s say again, you’re, you’re trading Apple, OK, that’s probably the best, best one. Everybody knows about Apple and you get a trade setup. It’s you’re going to take it not because it’s a great trade setup or it’s the best trade setup available that you can find.

5:23
It’s just a trade set. Oh, the stocks trading. This is the only stock I trade. It’s a setup. I got to take it. It may not be a good setup. It may be a bull flag in a bear market. Well, is that really a good one? No, it’d probably be better to take a bear flag in a bear market. And so that’s what happens when you’re trading a stock.

5:40
It forces you to take trades that may not be in your best interest because it’s just simply a trade setup. What I’d rather do is do the trade setup. I want the best trade that I can find. I want to find the stock that’s following the markets lead, that’s in a strong sector, that’s moving the market, and I want to be in the industry that’s pushing the sectors higher.

6:01
That’s my top down trading strategy and the top down trading strategy is actually a course that I have where I outlined essentially everything that I know about trading over the past 30 years. Yes, this is a plug for my course, but I’d be remiss if I didn’t tell you about it because I think it’s a great way for you to learn how to trade stocks, especially if you’re starting off and you just don’t really have that success yet and you’re trying to find out how can you experience success in the stock market.

6:26
My self made Trader course at shareplanner.com will teach you exactly how. It’s over 25 hours of instructional videos, over 100 modules that I’m going to teach you everything that I know. So check that out up shareplanner.com. Now that’s how I trade. I don’t just trade one stock, I trade a variety of stocks.

6:44
I was looking at My Portfolio today and just like the the number of swing trades that I have going on right now and how many of them is the first time I’ve traded those particular stocks this year. And so there’s a number of stocks that I’ll only trade once a year and there’s a lot of stocks that I won’t trade at all. There’s times where I trade stocks for the first time ever and that’s just part of the swing trading.

7:04
I’m trying to find the best setup that I can take and if it’s in a stock that I’ve never traded or a stock that I’ve traded for the 500th time, I don’t care as long as it’s the trade setup, not just a trade setup. So the dull moments, they’ll lead you to taking just mediocre trade setups a lot of times instead of the best kind of trade setups.

7:26
Also, it becomes personal when the stock doesn’t do what you expect it to do. For me, trading a lot of different stocks, if the stock doesn’t work, I don’t really care. OK, there’s another trade. It’s on to the next trade. But when you trade that same stock over and over and over again, it starts to become a little bit personal.

7:42
It’s you almost feel like that stock’s your own company and in some ways and in the way that you react to what it does. And so when it does something that you don’t expect, you almost start to take it personal. And that’s what you don’t want to do in trading, because then that starts to lead the revenge trading that starts to leading to doubling down, ignoring stop losses, because you know, this stock, this is my stock.

8:02
And and that’s just not what you want to do. It also will lead you to taking arbitrary numbers. I’ve I met this guy. I enjoy cruising with my wife because living, you know, on the Space Coast, we have easy access to a port. And so we’ll sometimes go to these weekend cruises.

8:19
That’s, that’s usually our favorite thing. We can relax, relax over the weekend and be back before the opening bell on Monday. We, we sat next to these, this couple. Well, I shouldn’t say sat next to them, but they’re like 1 table over and the guy was asking what I did for a living and, and I had the opportunity to tell them what I did.

8:38
I did a podcast and then naturally it always talked about it. It always leads to what they’re trading almost every time it, it’s, it’s a great conversation starter when you tell them that you have a podcast that talks about how to trade stocks in the stock market. And so he was telling me about how he actually trades Royal Caribbean.

8:54
Like my wife and I, we go on these cruises once a month. And actually, I think he said every other week, which I feel like that’s way overkill. He, he knew the waiters and everything. He goes on the same ship and ironically, he trades Royal Caribbean. That’s like his stock. And he was telling me that, oh, I, I traded every time at $40 and I sell it at $47.

9:15
OK, well, it’s like trading at all time highs. It’s blown that way. I think it’s like quadrupled since it, since it hit that $40 mark. So just often times you’ll say, well, the stock always is hitting this $47 level. And, and that’s where I always sell it and I wait for it to come back.

9:32
That’s fine. But it’s just a, it’s really just an arbitrary number if you don’t really have a reason for it. If you’re not, he didn’t say anything about, well, that’s where key resistance is every time or or whatnot. You’re just trading just because that’s where you’ve had success at in the past. So that becomes a, a mental barrier for you essentially to buy at this level, sell at that level without any real reason behind it.

9:55
But now he’s talking about, I’m talking about Jimmy from South Cacalaca here. He’s talking about how he’s dabbling in QQQ and he’s not having a lot of success. There’s a lot of people that trade the QS and trade the spies, particularly on Wall Street.

10:10
And you’re going to up against, especially if you’re trading in the futures market, which he doesn’t indicate here. But if you were trading in the futures market, even harder, you’re going to get some of the best minds against the best people out there that specialize in this. You’re running up against the machines, the algorithms, and it can be very, very frustrating at times.

10:28
And you can’t just and go at it with, oh, I’m feeling bullish today. The market’s gapping higher. I’m going to go it. Then you’re all of a sudden you’re chasing after things and then the market starts to retreat and then all of a sudden you’re back holding. It’s you got to have a strong back tested strategy if you’re going to try to trade the indices.

10:45
Can you trade just one ETF? Yeah, you can trade SPY or you can trade IWM or, or the QS. I do think that there’s a lot of risk that you can take on by trading the inverse ETFs or the leveraged ETFs. I do it, but I just just a warning, I mean you’re, you’re leveraging yourself, not necessarily with your cash, but you’re taking on a higher beta.

11:07
So if you know you’re trading TQQQ, you’re doing like a three beta of of the QS. So what you want to keep in mind there is that if you’re going to try to trade an ETF like like one of the indices, you’ve got to make sure that you have a strategy that’s been back to us and that you know that will work that out of 100 times, it’s going to be right X amount of times and you’re going to make X amount of dollars for every Y amount of dollars lost.

11:40
We also have to think about seasonality like we’re in the month of July. July is one of the best months in the stock market on a seasonality basis. It’s no shocker here that it’s up on the month. Now you start to get into August and September. It starts to get a little bit more bearish in October, even though that there’s your greatest market crashes that take place in October.

11:57
October doesn’t tend to be actually all that bad, especially as you get into like November and December where seasonally those the traders start to pick it up again. But we have to remember that when you’re trading just one stock, you’re going to be limiting yourself on the opportunities that you take.

12:15
SPY doesn’t take have all that great of opportunities. I was asked today about SPY. I was mentioning how SPY was breaking out of a two week range today and I was asked, well, would you buy it here? And I’m like, not really because I don’t really think SPY is the best opportunities when it’s trading at all time high. It’s not that it can’t go higher, but the bandwidth of the market tends to drastically reduce.

12:35
You’re not seeing the kind of moves that you saw off the April lows. You’re seeing much more incremental moves here. From here on out. It’s not going to be big, big moves, but you can get bigger moves out of the out of the individual stocks. Like for instance, IB IT, which follows Bitcoin made a really nice trade off of that this past week.

12:54
I was selling a portion of my gains for over 10%. Well, the market wasn’t up 10%, but if you were only trading SPY, you’re missing out on some of those other opportunities because you’re having to just settle for a setup, not the setup. And if I would have played that breakout on SPY today, that was just a setup, not the setup for me.

13:12
And finally, what I would say is that I prefer patterns and risk management over an individual stock. There’s so many stocks that I pass up on because the risk management isn’t there. It’s not the right set up. I pass it up because there’s not a a really good pattern that I can seize upon or a good support level that we can play a bounce off of or a trend line.

13:36
I prefer the stocks that are actually setting up for me. I don’t care what the stocks are as long as it’s provided me with an opportunity to trade them. It’s the exact opposite if you just limit yourself to, to 1 stock or just a couple of stocks. And, and the reason for that is that you’re forcing trades to happen.

13:53
You’re, it’s almost like when, when you’re in the, in a desert and you, you’ve been starved, You know, you don’t have water and you’re thirsty. You start to see, you know, these mirages where you, you think that you’re seeing it and all of a sudden you find yourself just drinking, drinking sand. You’re, you’re not actually drinking water.

14:10
And that can happen with the stock market when you’re just trading like one or two stocks or just one in particular, you can start seeing trade setups that aren’t there because you’re so desperate to make a trade. And So what we want to do as traders is not just limit ourselves to 1 trade.

14:25
We want to be able to expand our horizons. We want to be able to go after as many good high quality trades, the trade setups instead of a setup. If you enjoyed this podcast episode, and I hope you did, make sure to leave me a five star review on whatever platform you’re listening to me on.

14:42
And if you’re watching me on YouTube, make sure to to like and subscribe and and tell me what you thought of the episode in the comments below. Make sure to send me your questions, ryan@shareplanner.com. I read them, I use them. This person sent me this question just earlier this week. Now it’s a podcast episode.

14:58
I appreciate it when you guys reach out to me and tell me your questions, tell me your concerns. More than likely you will get a podcast episode. Not enough people actually write the show. And check out shareplanner.com and specifically check out the self-made Trader. I think it’s a course that you’ll really like and benefit from.

15:15
Thank you guys and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the stock market each day with traders from around the world. With your membership, you will get a seven day trial and access to my trading room, including alerts via text, e-mail and WhatsApp.

15:35
So go ahead, sign up by going to shareplanner.com/trading Block. That’s www.shareplanner.com/trading-block and follow me on SharePlanner’s, Twitter, Instagram and Facebook where I provide unique market and trading information every day. If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

15:56
All the best to you and I look forward to trading with you soon.